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House Price And Income Distributions

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Calling our resident statisiticians: I'm looking for some data.

What I want to do is map household income to house "values". This would produce a dataset like this:

Household income / Expected house value

£20k £123k

£30k £187k

£40k £234k

£50k £277k

£60k £310k

£70k £367k

All the numbers above are fictional: I want to detirmine the real ones so that I can find the "correct" value of the house I should be living in (whether rented or owned) given my income.

To do this I would break down the two distributions so that the deciles align and I can find some equivalence points. Yes I know there are probably flaw with the analysis but it would be an interesting exercise.

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Thes may be useful - cumulative distributions of prices and earnings ... :)

I did a house price distribution for Southampton (not inc. flats) and posted on another thread – the average price matches the national level, and I guess that the distribution is not too far out. Data extracted from rightmove early Sept/05.

link here

The UK earnings distribution, full-time all-male, adult rates, from the 2003 NES. Scale them up by about 6-7% for 2005 levels.

link here

Edited by spline

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How do you account for the fact that everyone buys at different stages in the house price cycle?

I bought my flat at the bottom of the cycle, paid off the mortgage and made a fortune in "property-pounds".

I then recycled the 'fortune' into a modest house at the top of the current cycle.

Net result; I earn in the top 1% of incomes but I live in a small terraced house. But take into account that it is located only 30 min cycle from my job in central London. And also account for the fact that my wife doesn't work. And that we run only a single, cheap car.

Problem is that everyone's situation is so different that I don't think the numbers you generate would mean much.

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Thanks for the links.

My aim would be to get an idea of the average household income for someone living in a house in the same priceband as yours. Or conversely, given your household income, what is the "average" house value that you should be living in.

I'm well aware of the potential flaws and realise that the data I garner may well mean nothing. Nevertheless, it should be an interesting exercise.

I'm not thinking about buying or renting, just where people live.

I'll post an analysis later, unless someone beats me to it ;)

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Just noticed that Spline has already performed my analysis:

"The average joe on £16k needs to end up in a £160k house, the 50%-ile on about £22k in a £180k house, and the average on £27k in something close to £220k – these ratios are around 8x-10x."

I would like to repeat this analysis using household income and a national HP distribution, if I can find it.

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  • 301 Brexit, House prices and Summer 2020

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